Asda and Morrisons said on Monday that they would slash the cost of key commodities, ramping up rivalry in the UK’s food retail sector against the backdrop of rising inflation.
In Britain, where grocery price inflation touched 5.2 per cent in the four weeks to March 20, the highest level since April 2012, rising prices are putting a strain on household earnings for the first time since the 1950s, according to industry figures released last month.
Supermarket chains frequently aim to maintain the prices of so-called known value goods, which buyers instinctively know the price of, low while raising the costs of others.
After market leader Tesco and Sainsbury’s, Asda, Britain’s third largest grocer, said it would invest more than 73 million pounds ($93 million) to cut the prices of over 100 items, including fruit and vegetables, meat, rice, and noodles, and that the prices would be “locked in” until the end of 2022.
The company, which has been owned by brothers Mohsin and Zuber Issa and private equity firm TDR Capital since February last year, stated that pricing for the 100 items will drop by 12 per cent on average.
Meanwhile, Morrisons, the fourth-largest retailer, announced price cuts on more than 500 basic items, accounting for 6 pr cent of total volume sales.
Morrisons, which has been owned by Clayton, Dubilier & Rice since October, said its price cuts were in items like eggs, baked beans, rice, coffee, cereals, chicken, sausages, and nappies. According to the report, the average savings was 13 per cent.
Morrisons has also launched new “multi save” discounts, such as two boxes of cereal for 1.8 pounds ($2.30), as well as a “Compare & Save” campaign to help buyers uncover savings by substituting branded items for its own.
Asda and Morrisons have persistently lagged behind Tesco and Sainsbury’s, who have both been price matching German-owned discounter Aldi on key commodities, according to monthly industry data.
Tesco, on the other hand, warned earlier this month that profits will fall this fiscal year.
In March, the UK’s overall inflation rate reached a 30-year high of 7 per cent, with a record of nearly 9 per cent projected later this year. According to a survey released on Friday, consumer confidence in the United Kingdom has dropped to its lowest level in nearly 50 years.
According to Asda’s own figures, Britain’s lowest-income families had 74 per cent less discretionary income in March than they did a year ago.
It also said that starting in July, it would raise the salary of its 120,000 shop floor employees to 10.10 pounds per hour, as well as provide them with a bonus opportunity.
Separately, convenience store chain McColl’s, with whom Morrisons has a wholesale supply arrangement, warned on profit following a dismal Easter and claimed a refinancing of the company may wipe away its equity.
(Adapted from Latestly.com)